In a note to clients, Goldman slashed its 2013 gold price forecast to $1600 an ounce from $1810 an ounce amid a gradual increase in U.S. interest rates, a slowly improving U.S. economy and more hawkish interpretations of the Fed’s stimulus measures. The firm had previously forecasted a turn lower in gold during the second half of the year, but recent developments have prompted it to move forward its earlier projections.

“The last leg lower in gold prices over the past two weeks has occurred with real rates remaining unchanged.” Goldman analyst Damien Courvalin and Jeffrey Currie wrote in a research note. “While likely excessive in that respect, we believe that it has nonetheless exposed a quickly waning conviction in holding gold positions, especially ETFs.”

Last week, global gold exchange-traded funds — such as the SPDR Gold Trust (GLD) — suffered their largest outflow since January 2011, according to ETF Securities.

Goldman also cut its 2014 gold price target to $1450 an ounce from $1750 an ounce.

Over the short term, Goldman slashed its three-month price target to $1615, from $1825. It also cut its six-month target to $1600 from $1805 and its 12-month view to $1550 from $1800.

“The decline in prices since last fall and our updated forecast suggests that the turn in the gold price cycle is likely already underway,” Goldman said. “As a result, although our U.S. economic forecasts point to modest near-term upside to gold prices, we believe that a sharp recovery in prices to our previous price forecast is unlikely.”

The firm also suspects gold has a greater potential to fall further below its estimates rather than finish above its targets.

“In fact, we suspect that if indeed our forecast for further declines in gold prices proves correct, the fall in prices could end up being faster and larger than we expect as net long positions across COMEX futures and ETFs remain near their record highs,” Goldman says.

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Comments (5 of 7)

Major contradiction in the article? Look at the futures chart (bullish bets are at lowest since 2008 according to the chart/histogram), yet... “In fact, we suspect that if indeed our forecast for further declines in gold prices proves correct, the fall in prices could end up being faster and larger than we expect as net long positions across COMEX futures and ETFs remain near their record highs,” Goldman says.

12:41 pm February 26, 2013

shane wrote :

haha of course they want everyone out of gold banks are gonna get destroyed. gold is clearly going up and bernanke has just reitierated that qe is not stopping any time soon. and japan and all these other countries are doing more and more stimulus to cause inflation this is best time to buy it. It should reach the 2000 level by years end. With sequester problems and so much uncertainty and more stimulus gold is the only thing to invest in right now.

12:19 pm February 26, 2013

WILLIAMJAY wrote :

2 WEEKS AGO THEY SAID GOLD AT 1800 BY YEARS END.

WHO LISTENS TO THESE CLOWNS

12:12 pm February 26, 2013

L_Dave wrote :

GS has a history of telling its clients to "sell" and then buying that same investment for GS's own account.

11:52 am February 26, 2013

rstran wrote :

Such a load of scaremongering! They want us out of gold, and that's obvious.

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